Game of Trades: The Great Turning Point for the US Economy Has Arrived

It’s now been ten months since the Federal Reserve stopped raising interest rates. Typically, the central bank starts to cut rages eight months after its final hike, on average. That means we’re now in the “longer” part of “higher for longer” rates.

Meanwhile, the Treasury bond yield curve remains inverted. That’s also been the case for a record period of time. Typically, an inverted yield curve is a warning sign for markets.

Once that curve starts to revert, the real danger is typically near. We’re not quite there yet.

But the conditions needed for a recession to occur are in place, especially with higher interest rates finally weighing on the economy.

Meanwhile, the economic data shows expansion underway. But it will eventually flip to a contraction. That will take a catalyst.

One potential catalyst is an oil price shock. Despite rising geopolitical concerns in recent months, oil prices have remained muted. But oil price shocks led to big recessions in the 1970s and smaller ones in the 1990s.

Plus, oil prices surged 40% in 2007, topping $100 for the first time. That oil shock certainly didn’t help out the economy following the slowdown in the housing market. When consumers have to spend more on oil, they have less to spend elsewhere.

To look at the full conditions necessary to kick off a recession, click here.